If you become insolvent, the road back to solvency — that is, the long-term ability to pay your debts — can seem a long and hard one. There are, however, a number of support services and actions you can take to smooth this journey.

Involuntary closure

There are different types of involuntary closure — both apply to companies.

Liquidation

If a company can’t pay its debts, it may be put into liquidation, meaning all its unsecured assets are sold to repay creditors. A liquidator — often a specialist accountancy firm or occasionally the Insolvency and Trustee Service — is appointed to investigate the company, find out why it failed and sell any assets to help repay creditors.

Receivership

If a company doesn’t repay debt it has secured against an asset or assets, the creditor can appoint a receiver to sell the asset to repay the loan.

Receivership — often a condition of a loan agreement — doesn’t affect assets that haven’t been used to secure a loan.

A receiver is appointed to sell assets or manage the company in order to make enough money to pay its secured creditors. The receiver is responsible for paying highest priority debts first, eg unpaid wages or tax. These are known as preferential claims.

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